Ml European Investment Bank

I-^OOI Information

1 - 2001 · N° 107 ISSN 0250-3891

Contents EIB in 2000 1

Philippe Maystadt: EIB puts emphasis on efficiency and f lexibi l i ty

EIB at the plenary session of the European Parliament 10

EIB targets Climate Change 11

TENs: Focus t o shift f rom north-south to east-west 14

New Structured Finance Facility 1!

European E-conomic Growth: The impact of new technologies 19

EIB Group support for Europe's audiovisual industry 22

Appointments 24

2000

1999

1998

1997

1996

Finance contracts signed and Resources raised

(EUR billion) 36.0

29.0

31.8 28.4

29.5 30. 1

26.2 23.0

23.2 77.6

within the EU outside the EU

resources raised

Geographical breakdown of contracts signed in 2000

in the EU Art 1811 Belgium

United Kingdom | 11 , D e n m a r k

outside the EU

Sweden Finland

Portugal Austria

Netherlands

Luxembourg

Italy

Asia ι Latin America

^-Germany

-Greece

Ireland Spain

Highlights in 2000

the new "Innovation 2000 Init iat ive" (i2i) underpinning a Euro­pean economy based on knowledge and in­novation,

substantial increase in finance for SMEs and environmental pro­jects,

vigorous support fo r less advanced regions, which received over two thirds of individual loans granted wi th in the EU,

24% growth in lending to the Accession Coun­tries and buoyant activ­ity in other countries neighbouring the EU.

France Mediterranean

Countries | Accession Countries

EIB in 2000

EIB targets Climate Change, see page 11

In 2000, EIB financing for projects sup­porting European Union policy objec­tives totalled EUR 36 billion (up 13% on 1999).

EUR 30.6 billion went to projects with­in the EU Member States and close to EUR 3 billion to those in the Accession Countries, while lending in other countries ran to over EUR 2.4 billion.

To fund these activities, the European Investment Bank borrowed EUR 29 bil­lion on the world's capital markets.

On 31 December 2000, the ElB's ba­lance sheet stood at EUR 219.2 billion, with outstanding borrowings totalling EUR 160 billion and outstanding loans amounting to EUR 199 billion.

EIB Group established By becoming the majority shareholder and operator of the European Investment Fund (EIF) in June 2000, the EIB crea­ted a Group wi th in which the Bank is responsible for medium and long-term lending, while the EIF has become its specialist subsidiary for venture capital and SME guarantee operations.

Thus, the EIB Group is in a posi­t ion to offer SMEs, through its specialist partners, the fu l l range of financial products they need to develop and meet the challenges of a changing economy*

Innovation 2000 Initiative The EIB launched this initiative to pro­mote the Lisbon Strategy decided by the European Council (March 2000), which aims to build a Europe based on knowledge and innovation.

Through this initiative, the EIB Group is directing lending towards the fol­lowing objectives: development of SMEs and entrepreneurship, diffusion of innovation, research and develop­ment, information and communica­tions technology networks, and hu­man capital formation. i2i also embraces investment in European au­diovisual projects in order to strength­en the financial base of Europe's au­diovisual and film industry and its capacity to adapt to the challenges of digital technology.

page2 I EiB I N F O R M A T I O N 1-2001

Since May 2000, loans worth EUR 1.6 billion have been signed under ¡2i for investment in communications net­works (EUR 965 million) and educa­tion (EUR 450 million), notably com­puter literacy and teaching. Furthermore, venture capital opera­tions of some EUR 215 million in fa­vour of innovative SMEs have been concluded.

Over the next three years, the EIB ex­pects to lend between EUR 12 billion and EUR 15 billion under this initia­tive in addition to funds earmarked for developing venture capital opera­tions through the EIF.

Substantial increase in finance for SMEs EIB support for SME investment came to EUR 6.2 billion (up 44% on

EUROPEAN INVESTMENT BANK Lending in the EU

1999), of which over EUR 5.7 billion via traditional global loans (credit lines to local partner banks), foster­ing investment by some 27 000 SMEs. Another EUR 450 million contributed towards financing 24 venture capital funds in 10 EU countries, which acquire partici­pations in and help to strengthen the capital base of innovative SMEs in the high-tech sector.

In June 2000, the Bank's Board of Governors doubled the scope for EIB Group venture capital opera­tions to EUR 2 billion up to 2003. The Group's venture capital operations are entrusted to the EIF, the Group's subsidiary specialising in venture capital and SME guarantees. The EIF's activity focuses on the Member States, although its venture capital operations will now gradually be extended to the Accession Coun­tries with a view to assisting the emergence of high-tech companies.

...and environmental projects The Bank's lending for environ­mental projects showed a marked increase to EUR 6.4 billion (up 39% on 1999). Finance for projects safe­guarding the natural environment (water management, waste treat­ment and reduction in harmful emissions from industry) totalled

EUR 3.6 billion. Urban environmen­tal projects received EUR 2.8 billion in loans, particularly in the fields of public transport and urban deve­lopment.

Regional development

In line with its core mission of un­derpinning balanced regional development, the EIB pressed ahead with its support for the modernisation of industry and in­frastructure in less advanced re­gions. Aggregate lending in these areas came to EUR 20 bil­lion, comprising EUR 13.7 billion in the form of individual loans (representing 73% of total indivi­dual lending operations in the EU) and EUR 6.2 billion in global loan financing promoting small-scale SME ventures and local in­frastructure schemes. 45% of in­dividual loans went to projects in the Cohesion Countries (Spain, Greece, Ireland and Portugal).

EIB support for regional develop­ment forms an integral part of the EU's structural and cohesion poli­cies. In January 2000, the EIB and the Commission signed an agree­ment on even closer coordination of their regional development assistance over the period 2000-

Loan contracts signed 36.0 In the Union 30.6 Outside the Union: - Accession Countries 2.9 - other countries 2.4 Loans outstanding 198.9

Borrowings 29.0 Borrowings outstanding 159.9

Balance sheet total 219.2

Subscribed capital 100.0 - of which paid in 6.0

2006 in both the Member States and the Accession Countries, and particularly on co-financing invest­ment projects (EIB loans and EU budgetary grant aid).

TENs and human capital Lending for transport, energy and telecommunications infra­structure projects totalled EUR 6.6 billion and loans for health and education, EUR 1.2 billion. In these sectors, the EIB stepped up its involvement in Public Private Partnership financing (for example, communications infra­structure projects in the United Kingdom, Greece, Portugal and Germany as well as in the Accession Countries; education schemes in the United Kingdom).

EIB INFORMATION I-200I I page3

Loan contracts signed in 2000 and from 1996 to 2000 (EUR million)

COUNTRY 2000 amount %

Belgium (BE) 503 1.4 Denmark (DK) 991 2.8 Germany (DE) 6 038 16.8 Greece (GR) 1712 4.8 Spain (ES) 4 199 11.7 France (FR) 3 323 9.2 Ireland (IE) 419 1.2 Italy (IT) 5 640 15.7 Luxembourg (LU) 200 0.6 Netherlands (NL) 260 0.7 Austria (AT) 735 2.0 Portugal (PT) 1 852 5.1 Finland (Fl) 525 1.5 Sweden (SE) 621 1.7 United Kingdom (GB) 3 303 9.2 Other 321 0.9 Total European Union 30 644 85.0 Accession Countries 2 948 8.2 (of which Pre-Accesslon Facility) 1618 4.5 Total Accession Countries 2 948 8.2 Mediterranean Countries (excl. Cyprus, Malta) 1214 3.4 ACP-OCT-South Africa 541 1.5 Asia, Latin America 532 1.5 Balkans 154 0.4 Total Other Countries 2 441 6.8

amount 3 384 4 060

23 281 5 335

16 667 15 684

1 165 21 718

510 2 161 2 744 7 604 2 356 3 600

15 877 1 286

127 431 10 398 4 455

10 398 4 595 2 459 1 627

318 8 999

1996-2000 %

2.3 2.8

15.9 3.6

11.4 10.7 0.8

14.8 0.3 1.5 1.9 5.2 1.6 2.5

10.8 0.9

86.8 7.1 3.0 7.1 3.1 1.7 1.1 0.2 6.1

Grand Total 36 033 100.0 146 828 100.0

Additional project details can be found in "EIB Lending in 2000". This document and further information on the EIB Group's activity and organisation is available on the websites www.eib.org and www.eif.org.

page 4

Accession Countries EIB lending in the Accession Coun­tries focused strongly on transport and telecommunications projects linking the region with the EU (Crete and Helsinki corridors) and thus enabling it to participate in and integrate with the EU's internal market, while catching up econo­mically. Of EUR 3 billion in total loans, EUR 960 million went to transport infrastructure projects, notably roads and motorways (EUR 765 million), while EUR 175 million was advanced for rail schemes.

The Bank also placed special em­phasis on industrial modernisation, including SMEs.

Increasing attention was given to projects helping the Accession

EIB INFORMATION I - 2 O 0 I

Lending in regions neighbouring the EU

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The EIB placed special emphasis on modernisation of SMEs.

EUROPEAN INVESTMENT BANK Lending in regions neighbouring the EU

The EIB has previously participated in the financing of the tram network in Budapest, Hungary

Countries to meet the environmen­tal standards laid down in the ac­quis communautaire. Lending for environmental projects amounted to EUR 745 million, equivalent to al­most a quarter of aggregate EIB fi­nancing in these countries (water and waste treatment schemes at­tracted EUR 190 million and pro­jects enhancing the urban environ­ment, especially public transport schemes, over EUR 305 million, while EUR 250 million went for flood damage reconstruction in Ro­mania).

The EIB will continue to expand its activity in support of the pre-acces-sion process, backed by a EUR 8.7 billion lending mandate from the EU (2000-2007) and its own EUR 8.5 billion Pre-Accession Lending Faci­lity (2000-2003), entirely at the Bank's risk. This will further consoli­date the ElB's position as the major source of external finance for pro­jects in Central and Eastern Europe.

To prepare for enlargement, the

EIB merged its lending directorates for the EU Member States and the Accession Countries, so helping to facilitate operations.

Mediterranean region In the Mediterranean region, the EIB lent a total of EUR 1.2 billion in non-EU countries, mainly under the "Euro-Mediterranean Partnership". The focus was on modernising the private sector, including SMEs, and strengthening development of the local financial sector, plus enhancing infrastructure and the environment.

The Bank resumed its activities In Sy­ria and continued to back invest­ment underpinning the Peace Pro­cess In the region by financing projects in Gaza-West Bank and Jor­dan. Of overall EIB lending in the re­gion, EUR 575 million went to pro­jects in Turkey, largely under the "Turkish Earthquake Rehabilitation and Reconstruction Assistance" (TERRA) programme.

Stability Pact for South-Eastern Europe

The EIB contributed to the Stabil­ity Pact for South-Eastern Europe by making available a total of EUR 154 million in the region. The Bank is participating in the so-called Quick-Start and Near-Term programmes, In which the European Commission, World Bank and EBRD are also involved.

In particular, the EIB assisted recon­struction of Bosnia and Herzego­vina's power transmission and distri­bution systems, building of the Danube bridge linking Bulgaria with Romania, and upgrading of Albania's main North-South road corridor.

A framework agreement for EIB financing in Croatia was established at the end of 2000 and an EIB lend­ing mandate for the Federal Repub­lic of Yugoslavia is currently under consideration by the Council.

EIB INFORMATION I -200I I page5

other countries

In Latin America, lending totalled

EUR 400 million and in Asia, EUR

130 million. More than a quarter

of loans was directed towards pri­

vate­sector investment, underpin­

ning joint­ventures with European

companies and banks.

Particular emphasis was placed on

financing private­sector invest­

ment in the ACP countries,

benefiting both large and small

firms. Of the total EUR 400 million

lent, EUR 210 million took the

form of risk capital drawn from EU

budgetary resources. In the

Republic of South Africa, the Bank

lent an additional EUR 140 million

for small infrastructure schemes,

telecommunications and produc­

tive­sector investment.

Under the Highly Indebted Poor

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4ATION I ­200I

Countries (HIPC) initiative, the EIB

is contributing up to EUR 70 mil­

lion in debt relief for some 12

countries.

Borrowing

The EIB must aim to optimise borrow­

ing costs in order to be able to ad­

vance funds on the most favourable

conditions to project promoters, the­

reby encouraging investment.

In 2000, the EIB borrowed EUR 29

billion through 149 operations,

raising funds in 11 currencies, of

which 49.5% in GBP, 23% in EUR,

2 1 % in USD and the remainder

in CHF, Central and Eastern Euro­

pean currencies, HKD, JPY, TWD

and ZAR.

After swaps, the ElB's resources were

raised in three main currencies: EUR,

42.5%; GBP, 38%; and USD, 13.5%.

The substantial borrowing in GBP

reflects the very cost­effective

funding opportunities which the

Bank was able to seize (including

favourable conditions for swap­

ping GBP into EUR). The Bank thus

consolidated its standing as a non­

sovereign benchmark issuer

against a background of reduced

new UK Government issuance.

Funding in euro declined in 2000

because of less advantageous

borrowing conditions. These re­

sulted, not least, from the on­

going depreciation of the euro

and the consequent falling de­

mand on the part of US and Asian

Investors for euro denominated

bonds.

Despite less receptive market

conditions, the EIB further in­

creased its existing euro bench­

marks (EARNS ­ Euro Area Refe­

rence Notes) by regular

reopenings (new bond Issues with

the same Interest rate and matu­

rity as existing ones, so bolstering

their volume and liquidity) and the

Issuance of additional bonds with

maturities up to 2010.

Outstanding EIB benchmarks now

range from 2003 to 2010 with a vo­

lume of between EUR 2 billion and

EUR 6 billion each, and totalled ap­

proximately EUR 29 billion at year

end.

The ElB's efforts to continue boost­

ing the liquidity of its benchmarks

and to complete its yield curve un­

derline its commitment to the euro

as well as its leading role as a supra­

national issuer in this currency. The

EIB is now the only non­sovereign

borrower offering an entire euro

benchmark curve traded on MTS

platforms.

The USD remained an important

currency for funding in shorter ma­

turities and for taking advantage of

favourable opportunities for cur­

rency swaps, in view of the transpa­

rency, size and unmatched liquidity

of the dollar market. New issuance

was carried out by adding to exis­

ting benchmark issues.

The Bank was also present on the

Asian markets and succeeded in es­

tablishing itself as a prime borrower

in Hong Kong and Taiwan.

The EIB pursued its efforts to bor­

row in the currencies of the Acces­

sion Countries, both on domestic

markets and the Euromarket.

By virtue of its top credit rating, the

Bank continues to be able to issue

longer­term bonds denominated In

such currencies, thereby contribu­

ting to the development of deeper

capital markets. Funds raised in such

currencies are on­lent to project

promoters in the region concerned.

Scope for project promoters to bor­

row in local currency eliminates ex­

change risks, serving as a strong in­

centive for investment which, in

turn, assists the Accession Countries

in catching up with the productivity

and income levels of the EU. ■

EUROPEAN INVESTMENT BANK EIB puts emphasis on efficiency and flexibility

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Philippe Maystadt: EIB puts emphasis on efficiency and flexibility

Brussels in February 2001: The EIB President introduced the Bank's activities in 2000

Exactly a year ago, having just taken over the reins at the EIB for a six-year term of office, I was determined to press ahead with various initiatives designed to increase our efficiency, diversify our instruments and areas of operation and make the Bank more open to dialogue with our partners on the European scene and the gene­ral public.

I am glad to be able to underline that, while preserving its exceptional fi­nancial strength and high degree of expertise in project financing, the EIB has successfully made several moves which have strengthened its capacity to provide effective support for the needs of the European economy and the Accession Countries:

• By becoming the majority sharehol­der and operator of the European Investment Fund (EIF) in June 2000, the EIB created a Group within which the Bank is responsible for medium and long-term lending, while the EIF has become its specia­list subsidiary for venture capital and SME guarantee operations.

Thus, the EIB Group is in a position to offer SMEs, through its specialist partners, the full range of financial products they need to develop and meet the challenges of a changing economy.

• By combining the financial teams responsible for its operations in the European Union and in the Acces­sion Countries into a single directo­rate, the EIB has expressed its com­mitment to promoting the integration of these same countries. By applying the same criteria, pro­ject selection and lending proce­dures, we are aiming to accelerate the transfer to these countries of the existing body of Community le­gislation and regulations, the acquis communautaire.

< The EIB Group has also focused its attention on the issue of finan­cing projects with a favourable impact on the environment; this is reflected in a net increase in fun­ding in this area (+ 39% in one year), particularly in the Accession Countries. Moreover, the same

concerns have led usto reorganise our Projects Directorate, with par­ticular emphasis on the ways and means of assessing the environ­mental impact of capital invest­ment and on formulating a stra­tegy designed to support the Union's commitment to comba­ting climate change.

« The Bank has also broadened its palette of financial products and developed a range of structured financing operations enabling it to accommodate more effectively the expectations of project pro­moters faced with specific risks and varying payback periods for their investment. To spearhead, and at the same time manage, this trend towards riskier projects and more sophisticated products, we have established a Structured Finance Facility and have set aside for this purpose a total of 750 mil­lion euro for the next three years, the intention being to generate a volume of operations amounting to between 1.5 and 2.5 billion euro. These products will prove

EIB INFORMATION I-2O0I I page 7

page 8

especially useful for financing communications and environ­mental infrastructure and pro­jects associated with the emer­gence of the "New Economy".

• Finally, the EIB has recently taken certain decisions concerning transparency and disclosure which will enable it to put its operations and procedures across more effectively to the public; in short, by joining with the European institutions in their information campaigns, the Bank is hoping to draw closer to the general public which is, when all is said and done, the f i ­nal beneficiary of our activities.

Pipeline on website This will Involve, in particular, listing projects under appraisal on our Web­site. The Project List discloses new projects which have reached an ad­vanced stage in the discussions on possible EIB involvement. The projects will be introduced before the EIB Board of Directors' approval provided the project promoter does not re­quest exclusion on the basis of confi­dentiality. Thus we combine a leglti-

EIB INFORMATION I-ZOOI

mate demand for disclosure with the respect of confidentiality towards the promoters.

Preparing for the knowledge-based society

The highlights of our lending activity during the past year can be grouped under two main head­ings: strengthening the Union's economic and social fabric in pre­paration for the "New Economy" and increased support for the Union's partner countries, espe­cially those on its periphery, with a view to future enlargement.

Since the Lisbon European Council (March 2000), the EIB Group has been firmly committed to a new programme of support for invest­ment aimed at facilitating Europe's transformation into an innovation-led and knowledge-based society.

Baptised "Innovation 2000 Initia­t ive" (i2i), this programme Is de­signed to supplement our tradi­tional activities and steer a substantial proportion of our f i ­

nancing towards the five priorities flagged by the Lisbon Council: pro­motion of human capital (training); research and development; the new networks based on informa­tion and communications technolo­gies; dissemination of innovation; and leading-edge SMEs.

Specifically, the Bank intends to allocate aggregate lending of 12 to 15 billion euro to this pro­gramme over a three-year period and to devote 2 billion to the pro­vision of venture capital for SMEs via the EIF. Already, since Lisbon, we have granted loans worth more than 1.6 billion, or over 11% of our individual loans within the Union, and have invested nearly 500 million euro in 34 venture ca­pital operations.

This initiative is intended to sup­plement the Bank's traditional ac­tivities: for example, it comes on top of the 5.7 billion or so that we, in partnership with the Euro­pean banking community, have invested this year in more than 27 000 SMEs. It is also additional to the dedicated approach adop­ted by us over a period of years towards developing Trans-Euro­pean Networks and other commu­nications infrastructure (roads, railways and telecommunications) as well as towards facilitating pro­jects to enhance management of the natural and urban environ­ment in all our Member Coun­tries, an objective that alone ac­counts for more than 35% of this year's activity.

In fulf i lment of its primary mis­sion, the Bank has devoted 73% of its financing to generating new investment in assisted areas (with more than two thirds going to the Cohesion Countries alone, i.e. Greece, Ireland, Portugal and Spain) and this policy is being pursued particularly vigorously in certain key sectors. Thus, for example, nine tenths of our pro­jects in health and education are located in those areas of South-

EUROPEAN INVESTMENT BANK

EIB puts emphasis on efficiency and flexibility

ern Europe and East Germany

lagging furthest behind in their

development.

Paving the way for enlargement

Naturally, the lion's share of our fi­

nancing outside the Union has gone

to the countries in areas bordering

the Union to the South and East.

In the Accession Countries of Central

Europe and the Mediterranean,

where it is far and away the leading

source of multilateral finance, the

Bank is endeavouring to strengthen

the internal cohesiveness of the econ­

omies concerned and to close the gap

between them and those of the

Union in terms of productivity and

per capita income. Thus, the 3 billion

or so euro we have invested in these

countries in the course of the year (up

24% on 1999) has gone mainly to­

wards modernising transport infra­

structure (especially that likely to

facilitate integration of their econo­

mies with each other and with that of

the Union), towards developing pri­

vate enterprise (particularly joint ven­

tures between local and EU firms)

and, lastly, towards financing pro­

jects aimed at protecting the natural

or urban environment, all of which

will help to make these regions more

attractive to investors.

I am also pleased to note that the

growth, in recent years, of our lend­

ing for environmental projects re­

flects, on the one hand, the In­

creased technical capacity of the

countries of the region to generate

such projects and, on the other, their

keener awareness of the need to

place more stress on the qualitative

aspects of economic development.

The Bank is determined to pursue its

efforts in this direction, as requested

by the Helsinki (December 1999) and

Lisbon (March 2000) Councils.

In 2000, the EIB invested 1.2 billion

euro in the Euro­Mediterranean

partnership countries in furtherance

of the objectives of the Barcelona

Process, in particular private sector

development and environmental in­

vestment, with a view to a customs

union between the countries

concerned and the European Union

by 2010.

The relevance of our primary invest­

ment in the Mediterranean partner

countries, which increased substan­

tially this year (up 51 %, if the loans

for reconstruction of earthquake­

stricken areas in Turkey are included)

was reaffirmed by the Fourth Euro­

Mediterranean Conference in Mar­

seilles (November 2000) and by the

Nice Council (December 2000) which,

moreover, invited the EIB to step up

its action by putting in place an addi­

tional 1 billion euro loan programme

in the region, in addition to its cur­

rent 6.4 billion mandate for the per­

iod 2000­2006.

A diversified presence on the capital markets

The EIB finances most of its loans

through calls on capital markets

where its issues are rated "Triple

A". As one of the leading non­

sovereign borrowers on the

world financial stage, in order to

raise the large volume of funds it

needs to finance its activities ­

EUR 29 billion last year alone ­

the Bank is obliged to maintain a

diversified presence on the mar­

kets for various currencies and

types of borrowing. In so doing, it

attaches importance to optimi­

sing the cost of its resources in or­

der to be able to pass on the best

possible financial terms to the

promoters of the projects it de­

cides to support in pursuit of the

Union's objectives.

Thus, while remaining firmly

committed to supporting devel­

opment of the euro, the Bank has

anchored its borrowings on three

major currencies: the pound ster­

ling, which accounted for 49.5%

of pre­swap funding (38% after

swaps), the euro which represen­

ted 23% (42.5% after swaps) and,

finally, the US dollar with 21 %, li­

kewise before swaps (13.5% after

swaps).

In the sterling market, we are the

largest non­sovereign issuer (ac­

counting for about 12.8% of non­

Gilt issues) and our benchmark is­

sues, whose maturity curve

extends over 30 years, comple­

ment those of the British Govern­

ment. This policy of regular fund­

raising, catering for demand by

institutional investors for pounds,

enables us to resource ourselves at

the keenest cost.

We are determined to pursue an In­

novative borrowing strategy so that

we can better accommodate the

needs of investors, particularly

those operating In the European

currency.

The euro remains the most impor­

tant disbursement currency for the

Bank which, thanks to its policy of

switching into that currency. Is able

to offer euro area and third country

promoters bespoke rate and matu­

rity structures for their projects. ■

EIB INFORMATION I ­200I I page9

EIB at the plenary session of the European Parliament

Mr Alain Lipietz (Verts/ALE- Group of the Greens/European

Free Alliance) presented the report on "Action taken on

the EIB Annual Report" in February in the

European Parliament.

Environmental

protection in

particular

attracted the

attention of

Parliament.

As a sign of the European Parlia­

ment's desire to take a keen interest

in the activities of all European insti­

tutions, the plenary session held on

14 February discussed and then ap­

proved the report "Action taken on

the EIB Annual Report" presented by

Mr Alain Lipietz (Verts/ALE ­ Group

of the Greens/European Free Al­

liance) on behalf of the Committee

on Economic and Monetary Affairs.

The examination of Parliament's first

report on following up the Bank's ac­

tivities marks a major step forward in

relations between the Bank and Par­

liament, since it demonstrates Parlia­

ment's legitimate concern to take ac­

count of the activities of the EIB in its

overall assessment of progress in at­

taining the objectives of the Union

and enables the President of the

Bank to be heard by the Assembly as

a whole in response to questions

from its members and, by extension,

from the citizens of the Union whom

they represent.

In his presentation to Parliament, Mr

Lipietz emphasised the quality of the

constructive dialogue he had had

with the EIB when preparing the do­

cument and the detailed informa­

tion he had been able to glean to

evaluate the activities of the Bank in

the light of the demands of the Com­

mittee on Economic and Monetary

Affairs and of the criticisms from the

community at large.

page 10 I Eie I N F O R M A T I O N 1-2001

"We have thus produced a report

which is virtually unanimous", stated

the rapporteur, who added: "unani­

mity was achieved on proposals for a

shift of emphasis which are addres­

sed at least as much to the other bo­

dies, and even States, of the Euro­

pean Union as to the European

Investment Bank."

In reply to the rapporteur and the

speeches made by the four political

groups which had contributed to the

plenary discussions (PPE, PSE,

Verts/ALE and GUE/NGL), EIB Presi­

dent Philippe Maystadt, described

the Economic and Monetary Com­

mittee's report as "stimulating and

useful" and told the Assembly that

"work had already started on imple­

menting a number of the recom­

mendations made in the draft reso­

lution". This applied to three areas

to which the parliamentary report

attached particular importance, viz.

the environment as one of the

Bank's operational priorities, the

evaluation of the real impact of pro­

jects and the monitoring structures.

Environmental protection in particu­

lar attracted the attention of Parlia­

ment. The identification of projects

that contribute directly to environ­

mental protection is one of the top

five priorities under the ElB's Corpo­

rate Operational Plan endorsed by

the Bank's Board of Directors for the

period 2001/2003 and has been the

focus of special attention, resulting

in a marked growth in lending in this

field (up by 39% in 2000), particu­

larly in the accession countries,

where it accounts for nearly a quar­

ter of loans granted.(1) The same

concern has also prompted the Bank

to reorganise its Projects Directorate,

by laying particular stress upon the

methodology for assessing the envi­

ronmental impact of projects and

upon defining a strategy for suppor­

ting the commitments entered into

by the Union, in the wake of the

Kyoto Conference, to guard against

climate change.(2)

Transparency and dialogue

The examination of the European

Parliament report on following up

the Bank's activities should be seen

in the context of the increased effort

being deployed by the EIB to provide

greater transparency and more in­

formation concerning its operations.

The Bank's new policy of disclosure,

which was welcomed by Parliament

in these debates, will enable the

Bank to publicise its activities more

effectively and provide the public

with wider access to information

about its procedures and operations.

This will be reflected in particular in

the publication on the Bank's web­

site, before the corresponding len­

ding decisions are taken by the ElB's

Board of Directors, of the list of pro­

jects being examined, except where

the project promoter has good rea­

son to object on grounds of confi­

dentiality. Furthermore, a section of

the Bank's website entitled "Infor­

mation Policy" will bring together all

the documents governing the ElB's

relations with the public, as well as

information on projects about which

questions have been raised by Euro­

pean citizens.

In this way the EIB wishes while res­

pecting the special nature of its rela­

tionship with its clients, the majority

of which are in the private sector ­ to

contribute to the endeavours of Eu­

ropean institutionsto move closer to

the citizens who, in the final analysis,

are the ultimate beneficiaries of its

activities.(3) ■

1. See the Report on the ElB's activities in 200O, pp. 1 ­ 9. 2. See article "The EIB and Climate Change", pp. 11­13. 3. The text of President Maystadt's address to Parliament is available on the ElB's website (www.eib.org) under "Information Polio// Topical News".

EUROPEAN INVESTMENT BANK EIB targets Climate Change

According to the latest decision of its Board of Directors, the protec­tion and improvement of the envi­ronment in general and support for the climate change policy of the Eu­ropean Community in particular, are "top priority" fields of activity of the EIB.

The term "climate change" is used here to refer to future probable changes in the earth's climate, notab­ly those in temperature ("global warming"), associated with the "greenhouse effect" and attributed to human ("anthropogenic") activities.

This reflects the central position of climate change in the framework of Community environmental policy objectives as well as the principles enshrined in Community environ­mental law.

Probably more than any other en­vironmental issue, climate change cuts across all the activi­ties of the Bank. In fact, through financing projects, the Bank is al­

ready making a significant contri­bution to climate change abate­ment and mitigation.

The EIB is already working in the field of climate change, financing projects to promote renewable energy, energy efficiency, com­bined heat and power (CHP), in­dustrial efficiency, waste manage­ment and public transport.

Background The mainstream scientific commu­nity now generally agrees that "glo­bal warming" is taking place due to human activities. It is deduced that this is the outcome of a complex ocean-land-air relationship driven by the emission of greenhouse gases (GHGs) - especially carbon dioxide (C02), which accounted for about two thirds of total European Union (EU) GHG emissions in 1990 - notably through the combustion of fossil fuels in the energy, transport, indus­trial and household sectors.

The Inter-governmental Panel on Climate Change (IPPC) estimates that, under "business-as-usual", global mean temperature will in­crease in the range 1.4 - 5.8C by 2100 (see diagram page 12). Global warming is likely to give rise to an increase in sea level, changes in the volume and distribution of precipi­tation by region and season and probably a greater severity and fre­quency of extreme weather events.

In this context, at the 1992 Rio "Earth Summit", over 160 countries signed the United Nations Framework Convention on Climate Change, the aim of which was to stabilise GHG emissions at 1990 levels.

The International commitment to action was strengthened in 1997 with the signing of the Kyoto Pro­tocol, according to which the main industrialised countries would limit their respective GHG emissions in the period 2008 -12 by on average about 5% below those of 1990. The

EIB INFORMATION I-200I I page 11

Projected Change in Global Mean Surface Temperature

"burden-sharing" agreement com­mits the EU as a whole to an 8% re­duction.

Although there Is some doubt "whe­ther" and, if so, "when" the Kyoto Protocol will be ratified, it is clear that a carbon constraint is fast becoming a feature of the environmental policy landscape.

Apart from the approach of the Com­munity described below, a number of Member States have also published their own climate change policies and associated frameworks of institutions and measures (see e.g. for France, "Programme National de Lutte contre le Changement Climatique", 2000/10 (2000)). The same is true of many large corporations and finan­cial institutions.

The Community Policy Framework

Within the context of promoting sus­tainable development, climate change is high on the environmental policy agenda of the European Com­munity (EC). An EC policy framework is gradually taking shape. The gene­ral approach - to reinforce the mea­sures being taken at the national level - is made up of a number of "common and co-ordinated policies" in four main fields.

EC climate change policy also repre­sents a good example of how envi­ronmental concerns are being inte-

page 12 I EIB INFORMATION 1-2001

1 Γ 2080 2100

source: IPPC

Main Evolving Features of the EC Policy Framework

• Planned directive on an energy product tax as well as measures to promote improvements in energy efficiency and renewable energy

• Voluntary environmental agree­ments in specific industrial sec­tors, building on the experience in the automobile sector

• An enhanced G H G monitoring and verification system

• Promotion of the "Flexible Me­chanisms" of the Kyoto Protocol, through emissions trading and project-related emissions reduc­tions (Joint Implementation (JI) and the Clean Development Me­chanism (CDM))

grated into other Community policy areas, as required by the Treaty of Amsterdam (Article 6).

Examples of relatively G H G friendly activities: in the energy sec­tor - renewable energy; in transport - rail; in industry - eco-efficiency.

The Approach of the EIB The proposed response by the EIB to the issue of climate change in­corporates a number of compo­nents. The Bank has experience

with most of these; the novelty is in putting them together and strengthening their application as a package. Implementation will depend on working together in various ways with various public and private sector partners, inclu­ding the Commission, Member States, large European corpora­tions, the financial sector, multila­teral financial institutions and NGOs. The components can be grouped under three headings, In­ternal policies and procedures, in­vestment financing and financing instruments.

Policies and Procedures There are three aspects under this heading.

Measurement It will take time for the EIB to de­velop a reliable and meaningful GHG emissions measurement and reporting system. It is proposed to concentrate on obtaining syste­matic measurements of GHG emis­sion reductions at the time of ap­praisal of those projects that are financed for climate change policy reasons, beginning with those in the energy sector where emissions can be measured with a relatively high degree of confidence.

Valuation The emission of GHGs gives rise to a so-called environmental "exter­nality". Market prices do not fully reflect the economic and social impacts that certain operations are expected to have in terms of climate change. It is therefore ap­propriate to introduce the quanti­fication and valuation of the im­pacts of GHG emissions into the cost benefit analysis carried out by the Bank's Projects Directorate in a selective way in those cases where such an analysis is expected to play a significant decision-ma­king role. For some projects, the valuation of GHG emissions may t ip the economic balance for or against financing - depending on

EUROPEAN INVESTMENT BANK

EIB targets Climate Change

the weight of other considera­

tions ­ gradually resulting in a

shift in the structure of the port­

folio of the Bank in favour of rela­

tively more climate­friendly in­

vestments.

Risk Management

It will also be important that the

analytical work of the Bank re­

flects the fact that projects whose

financial viability might depend

on the value of carbon credits suf­

fer from inherent uncertainty. For

instance, the market value of car­

bon will vary, among other things,

according to political decisions

about the degree of decarbonisa­

tion. More generally, the uncer­

tainties that the impacts of global

warming and the associated evol­

ving policy, behavioural and other

responses that they give rise to,

represent an area of risk for a va­

riety of projects that the Bank will

need to assess.

Investment

The EIB aims to step­up its project

financing in the field of climate

change in two broad areas, energy

saving (i.e. reducing the energy in­

tensity of production, transforma­

tion and use) and energy­substitu­

tion (i.e. promoting the transition

from the use of more to less car­

bon intensive fossil fuels and,

where practicable, from fossil

fuels to renewable sources of

energy).

Examples of areas with potential for

energy saving: industrial processes,

public transport and the regenera­

tion of heat and electricity;

examples of areas of energy substi­

tution: increased use of wind, bio­

mass and solar energy.

It is proposed to follow this "twin­

track" approach to varying degrees

in all the main economic sectors of

Bank operations ­ not only energy

itself but also especially transport

and industry ­ through individual as

well as global loan operations.

In addition, there is a number of

other more specific, some relati­

vely novel ­ but often relatively

small­scale ­ projects that the Bank

proposes to target in order to pro­

mote the climate change policy of

the Community, where appro­

priate exploring the potential for

synergy between environmental

investment and innovation, em­

ployment and growth (see "Inno­

vation 2000 Initiative ­ EIB focus

on knowledge­based economy",

EIB Information, 2 ­ 2000, 105)

Examples of relatively new sectors

with potential for Bank operations:

the capture and use of methane gas

from landfills for combined heat

and power (CHP) production; the

research and development, intro­

duction and manufacture of cli­

mate­friendly systems, processes

and products, e.g. fuel cells, photo­

voltaics, information and commu­

nications technology (ICT) in the

transport sector.

Pilot Jl and CDM projects will also

be promoted selectively to test

the modalities, regulations and

practices that are gradually being

firmed­up and to prime the mar­

ket for tradable emission credits

that could be offset against the

Kyoto commitments.

Instruments

By virtue of the context and often

their nature, certain climate

change projects might require

special financial incentives similar

to those that are already avai­

lable in other fields of EIB acti­

vity. Among the possibilities that

are expected to be deployed by

the Bank in the field of climate

change are the following:

• Long term funding, possibly

combined with some form of

promotional mechanism (cf.

existing arrangements for envi­

ronmental lending in the Medi­

terranean region).

• The use of METAP (Mediterra­

nean Technical Assistance Pro­

gramme)­type technical assis­

tance to cover the complex

process of project identification,

preparation and implementation

of climate change projects (see

EIB Annual Report, 1998).

•The scope for a global loan or

venture capital­type fund dedica­

ted to climate change projects.

Challenge and opportunity

Although climate change is not a

new field of operations for the EIB,

major uncertainties and unresolved

issues remain. For these reasons,

the Bank is undertaking a gradual

development of climate change­re­

lated operations through a judi­

cious approach that will be adap­

ted as experience is gained and

new evidence becomes available.

The issue of climate change repre­

sents a big challenge for the Bank

but It also offers an opportunity to

demonstrate its ability and willing­

ness to contribute in a timely and

appropriate manner to Community

policy to protect and improve the

environment. The Bank has been

successful in the past when called

upon to respond to specific issues

in an imaginative and flexible way.

It aims to be equally successful in

the case of climate change. ■

Peter Carter

Environment Co­ordinator

Projects Directorate

+352 4379 3424

p.carter@eib.org

EIB INFORMATION I-IOOI page 13

Trans­European Transport

Networks: Focus to shift from north-south to east-west

Philippe

Maystadt :

The EIB intends

to expand its

range of

financing

instruments for

TENs in the

immediate future

through the

introduction of a

Structured

Finance Facility ('),

which will

involve higher

degree of risk

sharing as well as

the provision of

guarantees and

mezzanine debt.

(') see also page 18

The challenges EU enlargement will bring about was the focus of the EIB Conference on

Trans-European Transport Networks, which took place in Strasbourgin mid-February.

There was also consensus that the name of the game is rail rather than roads.

Speakers and participants included representatives of the European Commission and

the Parliament, transport authorities and industrialists as well as bankers.

The aim of the conference was to raise awareness on how to combine

TENs priorities with sustainable development.

The EIB wished to do its share with regard to the new "White Paper" on future transport

guidelines to be drawn up by the European Commission and the EU Member States.

This "White Paper" will replace the current framework approved by the Essen Council in 1994.

Enclosed, excerpts of the presentations. These may be found in extenso on www.eib.org

Philippe Maystadt President of the EIB

"The EIB is particularly keen to

work with the Member States and

with the Community institutions to

give greater priority to the devel­

opment of rail transport systems

both for passengers and for freight.

Rail is increasingly seen as ca­

pable of playing a greater role in

tackling the transport challenges

facing the Union in the opening

decades of the millennium. These

challenges arise from the grow­

ing congestion, environmental

problems, traffic noise and the

growing public opposition to the

development of new road infra­

structure to meet increasing traf­

fic demands. Road and air trans­

port face severe capacity and

congestion difficulties, in many

cases, where rail could be more

efficient.

Loyola de Palacio, Vice-President of the

European Commission, responsible for transport

and energy issues

"Enlargement is accompanied by

efforts in the accession countries to

catch up economically with existing

EU members. Their economic

growth will therefore be faster

than within the Union. Economic

integration with Western Europe is

page 14 I EIB INFORMATION 1­2001

triggering an explosion of trade.

East­West links, which have not

been developed to any great extent

for historical reasons, risk be­

coming saturated. Another striking

aspect is the very rapid increase in

car ownership rates.

The Bank and most Member States

are convinced that the increasing in­

volvement of the private sector in the

investment in public infrastructure is

a welcome development and that

such PPP structures can be an impor­

tant complement to public sector in­

vestment in various countries

throughout the Union and also serve

to accelerate investment in infrastruc­

ture as well as improving the overall

value for money for the public sector.

Neither private sector investment nor

innovative financial instruments will

replace the role of the public sector

nor the need for public subsidies and

grants in various situations; nor do

they involve privatisation of public

services. They are nevertheless an im­

portant and valuable additional in­

strument to meet Community policy

objectives." ■

TENs:

EUROPEAN INVESTMENT BANK

Focus to shift from north-south to east-west

Not only are these trends and their

corollary, traffic congestion, likely

to exact a very heavy toll on so­

ciety but they are also incompa­

tible in the long term with the

commitments we entered into in

Kyoto to reduce greenhouse gas

emissions. The fact is that in the

transport sector sustainable devel­

opment remains an abstract objec­

tive which we have not yet man­

aged to express in concrete terms.

Since the historic agreement of

Parliament and the Council just be­

fore Christmas to guarantee access

to the national rail networks for

international freight carriers after

2008, a Swedish operator, for in­

stance, will be able to offer its ser­

vices on the network in France.

This should considerably improve

the quality of service and econo­

mies of scale at European level, so

that rail operators will become

competitive again in relation to

road hauliers. I believe that a 40%

increase in freight traffic on the

railways would be possible within

ten years.

Work will also be necessary to

facilitate the flow of freight traf­

fic on existing lines and to

construct new lines dedicated ex­

clusively to goods trains, port ac­

cess infrastructure and intermodal

terminals. Such measures are es­

sential to create a European rail

network that gives priority to

freight traffic, and I believe that

they are the top priority for capi­

tal investment within the Euro­

pean Union. Differences with re­

gard to technical standards

governing railway installations

and equipment are another tech­

nical obstacle to the establish­

ment of a network that is genui­

nely integrated at continental

level. It is by implementing the rail

interoperability directives that

trains will be able to cross fron­

tiers without these obstacles. ■

Loyola de Palacio:

Transport policy

must not be

concerned

solely with

competitiveness

but must also be at

the service of the

citizen. Lending

should encourage

the best possible

practices with

regard to safety.

Henning Christophersen, former

Vice-President of the European Commission

Henning Christophersen is one of the

founding fathers of the TENs scheme

in the early 90's. He underlined that

the most difficult task in the early

1990's was not to identify large scale

projects, but to make an assessment

of the maturity and feasibility of the

projects, as well as to find out how

they should be financed.

"A lot has happened. A large part

of the PBKAL (Paris, Brussels,

Köln, Amsterdam and London)

high­speed rail network has been

constructed. The Øresund Fixed

Link, the Malpensa Airport and

large parts of the so­called Nordic

Triangle and the motorway net­

works in Portugal, Spain and

Greece have been constructed. Fi­

nal decisions about the imple­

mentation of the Lyon­Turin and

TGV­Est in France have recently

been taken.

But, we do have a number of very

important rail projects where no vi­

sible progress has been made.The

Brenner pass and the extension to

Berlin, the French­Spanish high

speed lines and the Betuwe Line lin­

king Rotterdam to the Ruhr­district

are a few examples. There is also a

long way to go before the West

Coast line in the UK is in place in an

upgraded form.

Secondly, due to cumbersome and

not always well organised planning

procedures, due to a lack of cross

border coordination and different

priorities and due to a lack of fun­

ding, the completion and initiation

of projects have taken much more

time than expected.

The balance between freight­traf­

fic on rail and on road is still more

and more shifting in the favour of

road. Two big transit countries such

as France and Germany are lagging

behind as far as cross border rail­

road construction is concerned.

In all these respects, the inten­

tions behind the work we have

tried to do in 1993 and in 1994

have been without any major suc­

cess. It is still diffucult for the

Member States and transport au­

thorities to get their acts to­

gether and the notion of public­

private­partnership (PPP) is still

to a very large extent an unpro­

ven concept.

Moreover, the need for better in­

frastructure is even more obvious

today than eight years ago. For

example, most of the Accession

Countries have for the last 55 years

been without proper infrastructure

links with the rest of Europe.

In order to improve the situation, a

new list of top­priority projects

with emphasis on the enlargement

has to be established. A certain

shift of EU­budgetary resources

from country­wise infrastructure

projects to cross border and transit

projects is necessary. ■

EIB INFORMATION I-2O0I I page 15

Henning

Christophersen:

It should be

mandatory for the

national ministries

of transportation

to consult each

other and for the

EU transport

council to adopt

annual binding

guidelines on

TENs.

Konstan tinos

Hatzidakis: While

remaining an im­

portant source of

financing to the

public sector, the

EIB should also

work closely with

the private sector

and provide exper­

tise assessing the

economic and fi­

nancial viability of

the projects.

"We all recognise that there are se­

rious imbalances affecting the

transport system which have been

brought about not least by the fail­

ure to adopt a common strategy at

EU level.

Seven out the 14 priority projects

are still facing difficulties and no

timetables exist for their comple­

tion. The EU Parliament has called

Konstantinos Hatzidakis, Member of the European Parliament and Chairman of its Com-

mittee on Regional Policy, Transport and Tourism

upon the Member States to honour

their commitments in this respect

and the Commission, working in

tandem with the Member States in­

volved, should submit a timetable

for their implementation. The origi­

nal intention was to complete such

projects by 2010 and we must bear

in mind that these are an essential

outward sign of the EU commitment

towards an infrastructure policy.

I must also remind that cost consi­

derations are not the only factor

blocking such projects: lengthy

public enquiry procedures, political

discussions, administrative and le­

gal problems also exist. That is why

I think it is wrong to focus exclu­

sively on financial problems, al­

though I must state that more ef­

forts must certainly be made in

order to increase public financing

by the States and the EU.

Our common goal is to implement

the TENs and their extension to Cen­

tral and Eastern Europe, as quickly as

possible in order to ensure that we

have a European Transport System

that can properly meet the econo­

mic, social, environmental and safety

need of our citizens, help reduce re­

gional disparities and enable Euro­

pean business to compete effectively

in world markets." ■

Pierre Bilger, Chief Executive Officer of Alstom,

France:

"To achieve a real European rail sys­

tem is technically challenging. The

network has been developed inde­

pendently and the result is a true

"technological tower of Babel".

In order to progressively achieve a

European standard, first priority

has to be given to interoperability

with regard to all new infrastruc­

ture projects, both rail and rolling

stock. This development is already

visible to some extent, for example,

in the case of the Eurostar and Tha­

lys, which may operate in several

countries.

The challenge is to invest without

delay not only in high­speed pas­

senger rail links but also in similar

schemes for freight transports in or­

der to tackle congestion problems.

Personally I believe that the key to

successful future development of

the European rail network are well

designed and balanced public­

private partnerships. TENs are thus

not only an economic and a techni­

cal challenge, but also a political

one, as the ball is in the hands of de­

cision makers." ■

Helmut Draxler, Chairman of the Board of

Management of the Austrian Federal Railways:

"Marketing and operational excel­

lence are key factors on the way to

success, as well as perfect coordina­

tion between freight transport and

distribution to individual custo­

mers. If the final receiver of a deli­

very requests it for seven o'clock in

the morning, we implement a "just

intime delivery". In order to be suc­

cessful you need to invest in and

guarantee service to the customers

of your customers.

During the last 30 years, the Euro­

pean rail system has lost conside­

rable market shares of the Euro­

pean cargo market ­ from about

one third down to less than 10% ­

but we are now moving up in mar­

ket shares and productivity is in­

creasing. This may be achieved only

through effectiveness, good man­

agement and continuity. Our activi­

ties cannot be based on five year

long 'political cycles'."·

page 16 I EIB INFORMATION 1­2001

EUROPEAN INVESTMENT BANK

TENs: Focus to shift from north-south to east-west

Ja rom ir Schling, Minister of Transport and Com-

munications, Czech Republic:

" In much the same fashion as

other Central and East European

countries, the Czech Republic has

launched an ambit ious pro­

gramme t o modernize its trans­

por t infrastructure, and so far it

has progressed smoothly. By the

end of the year 2000, for

example, 503 km of motorways

and 335 km of expressways had

been bui l t since the start of

construct ion, the a i rpor t in

Prague had been modernized,

and the modernizat ion of the key

railway corridors is under way.

Yet this is only about half of the

government's strategic plan. If the

goals of Czech transport policy are

to be realized, we need to speed

up the processes that wi l l lead to

the desired state of the transport

infrastructure. The access to suffi­

cient fund ing sources t o ensure

maintenance and investment into

the transport infrastructure and

the public transport vehicle fleet is

of key significance for the imple­

mentation of our transport policy.

The most frequent sources of fun­

ding for transport modernization

and reconstruction are public bud­

gets, bank loans offered by institu­

tions such as the World Bank, EBRD,

and EIB, traditional loans, grants,

and structural assistance from the EU

(PHARE, ISPA, etc.), private capital,

and PPPs.

The in i t ia l items on this list are

fair ly wel l developed method i ­

cally and experience of the rules

for the i r appl icat ion has been

good, but private capital, or com­

binat ions of public and private

partnerships have come up

against diff iculties. Yet it is qui te

SCH I ING

evident tha t by get t ing rid of the

restrictions of annual budgetary

f inancing and passing on author i ­

zat ion t o independent licensees,

given the r igh t condit ions, we

could see the Implementat ion of,

say, motorway projects tha t the

state wou ld be unable to execute

itself in a realistic t ime. One of the

basic requirements is t o adapt our

current legislation. ■

"In conclusion, we are faced with a

challenge of crucial importance for

Europe's future. The development of

trans­European transport networks is

vital to avoid growing congestion of

our transport system, yet it must be

accompanied by a series of comple­

mentary measures designed to :

Ewald Nowotny, Vice-President, EIB, respon-

sible for Trans-European Networks :

• open up the sector to much greater

competition ;

• charge users prices which more ac­

curately reflect real costs, hence by

Including external costs ;

• make extensive use of intelligent

transport systems to Improve eff i­

ciency in terms of both logistic

chains and mobility In general ;

• favour the emergence of innova­

tive technical solutions for all as­

pects of the transport system ;

• incorporate environmental consi­

derations at strategic level ;

• accommodate the needs of internal

cohesion and Integration wi th

neighbouring countries.

If we are to coordinate the vigorous

measures planned, the TENs policy

will have to be reinstated at the very

top of the Community agenda. The

EIB stands ready to take up the chal­

lenge and to work hand in hand not

only with the Commission but also

with economic players in promoting

the development of a modern, eff i­

cient and sustainable transport sys­

tem for Europe." ■

EIB INFORMATION I - 2 0 0 I page 17

The EIB expands its range of

instruments for e.g. TENs through the

new Structured Finance Facility.

The Øresund link between Sweden

and Denmark, a TENs priority

project, has been partly financed

by the EIB.

The EIB is to establish a new frame­

work to widen the scope for pro­

duct innovation and development

and to extend its activities into

higher risk operations. These new

activities are to be covered by a

Structured Finance Facility (SFF).

Instruments to be offered under the SFF

could include:

• Senior loans and guarantees

incorporating pre­comple­

tion and early operations

risk;

• Subordinated loans and gua­

rantees;

• Mezzanine finance;

• Project related derivatives.

The SFF wi l l finance

projects which are in

line w i th the ElB's task

t o support investment

fur ther ing EU policy

objectives, in particu­

lar the new priorities

of its "Innovation 2000

Init iative" to promote

a European knowl­

edge and information

based economy, as

wel l as Infrastructure,

the development of

t h e Trans­European

and Public Private Networks,

Partnerships.

The focus of the SFF wi l l be in the

EU, w i t h the possibility of under­

tak ing operations in other coun­

tries where the Bank is satisfied

that the necessary legal and institu­

t ional f ramework is in place.

The Structured Finance Facility wi l l

extend the range of risk and com­

plexity of f inancing instruments

page 18 I EIB INFORMATION 1­2001

f rom the EIB Group for priority pro­

jects, including loans and guaran­

tees, as wel l as securit ization and

debt or derivatives structures. The

new Facility w i l l also enable the

Bank to take on the previous man­

date of the European Investment

Fund (EIF) to support the financing

of Trans­ European Networks.

Since the end of last year the EIF

has become the specialist risk capi­

ta l arm of the EIB Group, and is a

provider of guarantees for small

and medium­sized enterprise lend­

ing. Wi th the EIB as major sharehol­

der, the EIF is jo int ly owned w i th

the European Commission and a

group of public and private sector

financial institutions.

Products and pricing

The aim is to provide value added

through the SFF by complementing

commercial banks and capital mar­

kets w i t h the most appropriate f i ­

nancial instruments identif ied on a

case­by­case basis. These instru­

ments may be more complex or

"s t ructured" or carry a higher risk

than the Bank has taken in the past.

The Bank's pricing of SFF opera­

t ions wi l l reflect the higher risks

and complexity and wi l l for the

most part be in line w i th the mar­

ket fees, price or yields t o the co­

financiers.

Covering the risk

The risk associated w i th SFF wi l l be

covered th rough an allocation of

capital f rom the Bank's surplus re­

serves of up t o EUR 750 mi l l ion

spread over three years (2001­

2003). There wil l also be an addit io­

nal provisioning to the Bank's Fund

for General Banking Risks on the

Bank's balance sheet which wi l l es­

tablish the ceiling on SFF operations

the Bank can sign each year. Depen­

ding on the risk prof i le, the to ta l

annual volume under this limit, can

be expected be to be quite signifi­

cant and initially at least EUR 1 bil­

l ion.

Earlier project involvement

W i t h the various products avail­

able under the SFF, the EIB wi l l be

able to assume construct ion and

early opera t ion risks direct ly. In

certain cases, the EIB wi l l be able

to provide instruments coming

w i th in the SFF alongside its t rad i ­

t ional loan products. It wi l l there­

fore be able to play a more impor­

t a n t role in projects f rom the

outset.

The Bank's to ta l share in the pro­

ject's f inancing wi l l cont inue to be

no greater t han 50% of project

cost and its t rad i t iona l require­

ment for a thorough independent

appraisal of the project's technical

( including procurement and envi­

ronment), economic and financial

viabil i ty and legal structure wi l l be

reinforced to reflect the increased

risk the Bank assumes. ■

Adam McDonaugh

Informat ion and Communications

Department

+352 4379 3147

a.mcdonaugh@eib.org

EUROPEAN INVESTMENT BANK The ElB's 2001 Conference on Economics and Finance

"'OU' World? Ha! The Europeans are beginning to teach the Americans a thing or two about the secrets of doing business in the 21st century. "

Newsweek, 29 Jantiary 2001

The EIBfs 2001 Conference on Economics and Finance

European E-conomic Growth: the Impact of New Technologies

For over 40 years the Bank has tried to give helping hands by fi­nancing large "basic" infrastruc­ture works. But many are now ar­guing that the globalisation of commerce and the proliferation of information and communica­tion technologies (ICT) are rede­fining what it takes for a region to prosper. This is why the ElB's 2001 Conference in Economics and Finance was fully devoted to the impact of new technologies on economic growth.

The notable and simultaneous rise in both ICT investment and productivity growth in the United States in the second half of the 1990s has generated the wide­spread belief that these new tech­

nologies may indeed be key to a higher growth rate in economic output and incomes. At the same time, however, there is some evi­dence that the prolonged upswing of the U.S. economy may also gene­rate a cyclical acceleration in both business investment and producti­vity growth, which may not be sus­tainable once the expansion comes to an end. Differentiating between permanent and temporary ele­ments in the U.S. "new economy" is crucial when assessing whether Eu­rope is falling behind the United States and when designing growth-promoting policies in Europe.

Paul David, a Professor in econo­mic history at Oxford University who was the first speaker at the

conference, expressed the view that at least part of the U.S. growth acceleration is the result of a temporary surge in aggre­gate demand. But he also conclu­ded that a substantial fraction might turn out to be structural, resulting in a sustained improve­ment in productivity perform­ance. According to David, the reason we have only recently seen an acceleration in producti­vity growth from ICT investment is that it normally takes some time for new technologies to dif­fuse throughout the economy. ICT may thus be a new form of "general purpose technology", eventually generating large and sustained productivity gains stem­ming from better ways of organi-

EIB INFORMATION I-200I I page 19

sing economic activity, similar to the historical case of the electrical dynamo.

The productivity gains from imple­menting ICT are so far less visible in Europe, although some of the ob­served difference between the EU and the United States stems from different ways of measuring the economy. Patrick Vanhoudt (econ­omist at the ElB's Chief Economist's Department) showed that the EU is still far behind the United States in measuring ICT investment and pro­duction, which is likely to under­estimate the real growth rate of productivity in the EU compared with the United States. While these factors explain some of the gap in ICT spending, it seems a real diffe­rence remains. But Europe not only spends less on ICT that the United States, it also distributes its ICT ex­penditures very differently.

Kristian Uppenberg (from the ElB's Chief Economist's Department) showed that Europe spends at least as much as the United States on te­

lecommunications, but is well be­low the United States in spending on computers. If the economic gains from ICT spending stem from syner­gy effects from computers and tele-corns combined (such as the Inter­net) then Europe's ICT strategy may be too unbalanced to reap the full gains from the "new economy".

Session two took a closer look at the information technology and communications sectors. Pierre Montagnier from the OECD provi­ded a clearer description of what exactly is meant by the ICT Indus­tries. Harald Gruber (EIB Project Di­rectorate) subsequently looked at the dissemination of IT, addressing the question of whether possible market failure could lead to too low investment levels. Such pos­sible market failures include inade­quate financing of small and me­dium-sized companies and insufficient research and develop­ment - compare 1.8 percent of GDP in the EU to 2.8 in the US - in the winner-takes-all environment of the new economy. A third factor

could be a lack of necessary skills in the workforce. Rather than "pick­ing winners," Gruber suggested that governments support training, research and the promotion of en­trepreneurial talent.

Effective financing of new compa­nies seems to be a key factor be­hind the relative success in the Uni­ted States of making the shift to the "information society". In ses­sion three, which looked at the is­sue of finance, Bernard de Longe-vialle from Standard and Poor's assessed the impact of the Internet on banking activities. He predicted that Internet banking activities would grow quickly and become a driver of structural changes in f i ­nancial intermediation. Herman Hauser (founder of Amadeus Capi­tal Partners) commented on the supply side of funds from the point of view of a venture capitalist. He expressed the view that even with the institutional framework in place - the UK is for instance not particularly more risk averse than the US - generating a fertile envi-

page20 I EIB INFORMATION 1-2001

EUROPEAN INVESTMENT BANK

The ElB's 2001 Conference on Economics and Finance

ronment for venture capital can

take a long time. The successful IT

cluster around Cambridge that Hau­

ser started up took more than a de­

cade to become what it is today.

This transformation requires the

creation of a new generation of en­

trepreneurs, resulting from ade­

quate training and a change of val­

ues towards private wealth

accumulation, as well as willingness

to accept an inflow of skilled for­

eigners, a key element in the crea­

tion and growth of new start­ups in

Silicon Valley.

IT clusters were at the heart of the fi­

nal session. Danny Quah from the

London School of Economics showed

that Europe already has a substan­

tial number of technology clusters,

mainly concentrated within a dense,

urbanised economic area extending

from the South of England across

the Benelux countries and south­

western Germany into northern Ita­

ly. That these urban areas attract

high­tech clusters is the result of bet­

ter access to specialised factor inputs

and the need in high­tech industries

for face­to­face interaction with

knowledge­able experts. In theory,

ICT may reduce some of these fac­

tors that lead to geographical ag­

glomeration, by reducing telecom­

munications costs and thus allowing

better long­distance communication

between workers. In practice, how­

ever, Quah believes that ICT pro­

ducts are typically associated with

increasing returns to scale, which

leads to greater concentration in

production.

Andrew Gillespie, James Cornford,

and Ranald Richardson (University

of Newcastle) shed additional light

on these ideas with the help of a

wide range of case studies. They

concluded that the "compulsion of

proximity" may persist also within

the ICT industry, with telecommu­

ting largely consigned to simpler

corporate functions such as custo­

mer service and back­office. The re­

sult may thus be that agglomera­

tions in the information society

become increas­ingly dominated by

R&D and command and control

functions, which depend the most

on the kind of personal interaction

that drives teamwork and creativity.

Bas Ter Weel and LucSoete (Univer­

sity of Maastricht) looked into the

labor market aspects of new tech­

nologies, and comforted the au­

dience with history. The fear that

technology will destroy jobs also

showed up in the automation de­

bate in the 1960s, it was still present

in the Delors' White Paper in the

early 1990s, but it eventually turned

out that new technologies did not

pose a tremendous problem for la­

bor markets. IC technologies spread

across all sectors and skill levels, in­

cluding the unskilled and the "re­

mote" sectors, they said. What is

more important is that labor mar­

kets are sufficiently flexible, and

that good active labor market poli­

cies are put in place.

ICT is not a miracle solution that will

bring the standard of living in the

lagging regions all of a sudden

more rapidly to the EU average. In

other words, ICT alone won't solve

the old Europe's chronic problems.

To keep prosperity growing, the

continent's lawmakers will have to

tackle the rigid labor market rules

that make it so hard for companies

to hire and fire employees ­ and

that often keep ambitious workers

from developing and applying new

skills on the job. Europe also needs

to build the kind of labor force to

meet the constantly mutating job

descriptions of a knowledge­based

economy. It will also have to put

more money where its brains are.

Clearly, the changes may not be

cheap or easy ­ that's precisely

where the new economy meets an

old reality! ■

So what is the conclusion of all this? Chief Economist's Department:

Obviously, new technologies have

an impact on how business is

conducted. Nobody will ignore that.

However, it has become clear that

Kristian Uppenberg +352 4379 3435

k.uppenberg@eib.org

Patrick Vanhoudt +352 4379 3439

p.vanhoudt@eib.org

EIB INFORMATION I­200I I page 21

t H ^m / JJK I

^ » o S H H

First commitment to Creative Industries Fund in Finland

The EIB Group's venture capital arm, the European Investment Fund (EIF), has signed a commitment to invest up to EUR 16.5 million in the Venture Fund for Creative Industries which will invest mainly in northern European countries. This fund will support sports, TV, movies and 'new media'.

It is the first Venture Capital fund dedicated to this sector, which is receiving increased attention from the European Union. The EIF commitment is an important breakthrough in the European media sector.

"The creative industries market may become the next "frontier" in venture capital. It certainly marks a field where Europe may have considerable leverage potential", says Walter Cernoia, EIF Chief Executive.

The management of the new fund is in Finland which is die home of many innovations of the European venture capital market. If the fund turns out to be successful, other venture capital funds dedicated to creative industries will be supported elsewhere in the European Union.

EIB Group support for Europe's audiovisual industry

Responding to the invitation from the Lisbon European Council (March 2000), the EIB Group has resolutely embarked upon a new programme dubbed the "Innovation 2000 Initia­tive" ("i2i"), intended to support in­vestment preparing Europe for a knowledge-based and innovation-driven society. This programme, which has now been operating for nearly seven months, has rapidly ta­ken off, with some EUR 2 billion in loans approved in sectors such as in­formation and communications tech­nology networks, human capital for­mation and research and development, the dissemination of innovation, and the development of an entrepreneurial spirit among inno­vative SMEs.

In December 2000, the EIB Group de­cided to introduce, under the "¡2i", a special sub-programme covering Eu­rope's audiovisual industry in the wide sense of the term, that is both production, distribution and dissemi-

page22 I E IB I N F O R M A T I O N 1-2001

nation of films, television pro­grammes and music, and develop­ment of the infrastructure required by this industry together with support for SMEs operating in this sector.

Deploying a variety of financial engi­neering techniques in partnership with the European banking commu­nity, the EIB Group aims to increase the volume of funds available and im­prove the financial terms offered to those operating in the industry. The "¡2i" audiovisual sub-programme will take two forms: lending by the Euro­pean Investment Bank for financing medium and long-term investment, and operations involving its specialist subsidiary, the European Investment Fund (EIF), for strengthening SME equity and granting guarantees.

This commitment by the EIB Group is being taken forward on three com­plementary fronts, two involving banking-sector finance for compa­nies, the third development of the in­

dustry specialising in providing ven­ture capital for the audiovisual sector. They will enable the financial base of this industry to be strengthened in or­der to make it more competitive, en­courage the development of Euro­pean content and facilitate the adjustment to digital technology.

Concentrating on firms' medium to long-term financing requirements

The EIB will make available its credit lines ("global loans") to banks specia­lising in finance for small audiovisual production/technology development companies as well as firms to which work from the large groups in this sector is subcontracted. Where there is scope for mounting operations in tandem with national or European arrangements for subsidising produc­tions, a number of these global loans

EUROPEAN INVESTMENT BANK

EIB Group support for Europe's audiovisual industry

could be supplemented under aid

schemes for the film and television in­

dustry. Forsorne global loans, the EIB

is also considering developing with

the intermediary financial institutions

risk­sharing and/or external guaran­

tee facilities.

Still in partnership with the banking

sector, the EIB will also be providing

finance for large private or public

sector television and audiovisual pro­

duction and distribution groups to

cover their infrastructure investment

needs (studios, digitalisation facili­

ties, transmitting stations, etc.) and

creative enterprises (production of

film "packages", distribution of

works and catalogues). In appro­

priate cases, depending on the cha­

racteristics of the projects being fi­

nanced, operations could take the

form of structured finance. The ob­

jectives pursued by the EIB are de­

signed to promote development of

the industry on a pan­European

scale, compensate for certain weak­

nesses inherent in the industry com­

pared with its global competitors

and support establishment of activi­

ties benefiting the numerous SMEs

to which work is subcontracted by

such groups.

Backing venture capital commitment to the audiovisual sector

Action by the EIB Group is also set to

strengthen the industry specialising in

providing venture capital for Europe's

audiovisual sector. In this highly spe­

cialised field, it will take the form of

EIF equity participations in new or

existing venture capital funds dedica­

ted to increasing the equity capital of

SMEs in the audiovisual sector. Acting

as a fund of funds, the EIF will thus be

launching out into a sector where the

lack of financial resources and pan­

European players is hampering the es­

tablishment of an effective venture

capital market. This innovative ap­

proach has been inaugurated with an

operation totalling EUR 50 million

signed in December 2000 between

the EIF and the specialist Venture

Capital for Creative Industries Fund.

Joining forces with the Community's "Media Plus"

With a budget of EUR 400 million

over five years (2001­2005), the

"Media Plus" programme is aimed

principally at helping firms to work

together to promote a pan­Euro­

pean dimension for the audiovisual

industry.

With that in mind, the "develop­

ment, distribution and promotion"

aspect of the Media Plus pro­

gramme will focus on support for

projects making use of innovative

technology and on measures en­

couraging international distribu­

tion of works with a European

content. At the same time, the pro­

gramme's "training" aspect will

help professionals working in the

industry and in the financial sector

to gain a fuller insight into the in­

dustry and its specifics.

The activities of the EIB Group and

those of Media Plus can therefore be

seen to be complementary. On the

one hand, they both foster, through

loans and subsidies, projects incorpo­

rating development/production and

distribution aspects and support in­

frastructure projects as well as the ra­

pid expansion of firms employing in­

novative technologies; on the other,

they will facilitate training schemes

which, by using equipment and pre­

mises financed by the EIB, will hone

financial and banking expertise tai­

lored to the audiovisual sector in a

context where EIB finance acts as a

catalyst for additional funding.

With this in view, the EIB Group

and the European Commission

could well launch joint ventures in­

volving creative productions or de­

velopment of the audiovisual in­

dustry, based on complementary

cofinancing arrangements bring­

ing together EIB loans and Com­

munity grants.

How to obtain finance?

The ElB's customary procedures will

apply to finance for the audiovisual

industry. Since December 2000, the

EIB and the EIF have already made a

number of contacts with industry spe­

cialists as well as financial and bank­

ing institutions that could act as inter­

mediaries for its funding of SMEs

either in the form of global loans or

by means of dedicated venture capi­

tal funds. The initial operations ­ cur­

rently under appraisal ­ suggest that

the "Audiovisual i2i" will be able to

bring together substantial financial

resources, with the EIB Group's lend­

ing at the outset exceeding

EUR 500 million.

The Bank will help to provide funding

for large­scale projects (those costing

around EUR 50 million minimum) by

granting individual loans directly to

the project promoter or a consortium

of financial backers. There are no spe­

cial formalities when it comes to sub­

mitting applications to the EIB for in­

dividual loans. Project promoters are

required simply to provide the Bank

with a detailed description of the pro­

ject and of the proposed financing ar­

rangements.

With regard to pro

jects that are to be fi

nanced using glo­

bal loans, firms are in­

vited to contact the

banks and intermedia­

ries involved directly. SMEs

wishing to strengthen their equi

ty through recourse to venture

capital or investment capital should

approach these specialist funds di­

rectly. In order to facilitate these

contacts, the list of these intermedia­

ries will be kept up to date on the

websites of the EIB (www.eib.org)

and the EIF (www.eif.org). ■

Henry Marty­Gauquié

Information and Communications

Department

+352 4379 3153

h.marty@eib.org

EIB INFORMATION I­200I I page23

EIB Information

¡s pub l ished per iodical ly by

the Information and Commu­

nications Department of the

European Investment Bank.

Mate r ia l wh i ch appears in

EIB I n f o r m a t i o n may be

f reely rep roduced ; an ac­

know ledgemen t and a cl ip­

p ing of any article published

w o u l d be appreciated.

European

Investment Bank 100, b d Kon rad A d e n a u e r L ­ 2950 L u x e m b o u r g

Tel . +352 4379 ­ 1 Fax +352 43 77 04

w w w . e i b . o r g

in fo@eib .org

Department for Lending Operations:

Italy, Greece, Cyprus, Malta

Via Sardegna, 38

I ­00187 Rome

T e l . + 3 9 ­ 0 6 47 19 ­1 Fax +39 ­ 06 42 87 34 38

Athens Office

364, Kif issias Ave & 1, Del fon

GR ­ 1 5 2 33 Ha landr i /A thens

Te l .+30 (1)682 45 17­9

Fax+30 (1)682 45 20

Ser//n Office

Lennestrasse, 17

D ­ 10785 Berl in

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Fax +49 (0) 30 59 00 47 99

Lisbon Office

Avenida da Liberdade, 144 ­156

Ρ­ 1250­146 Lisbon

Tel. +351 ­ 21 342 89 89 or 21 342 88 48

Fax+351 ­ 2 1 347 04 87

London Office

68, Pall Mal l GB ­ London SW1Y 5ES

Te l .+44 (0)207 343 1200 Fax +44 (0) 207 930 9929

Madrid Office Calle José Ortega y Gasset, 29

E ­ 28006 Madr id

T e l . + 3 4 ­ 9 1 431 13 40 F a x + 3 4 ­ 9 1 431 13 83

Brussels Office

Rue de la Loi, 227

Β ­ 1040 Brussels ■

Tel. +32 (0) 2 235 00 70 Fax +32 (0) 2 230 58 27

Lay­out: Mar lene Hignoul

Studio 352

Photos: EIB Photographic library,

Stone, ImageBank, Fotostock,

La Vie du Rail (Recoura), Öre­

sundskonsortiet, European

Parliament, Konrad Scheel

Printed ¡η Luxembourg by Buck (<>v

on Arctic Silk paper Ό ^ awarded the "Nordic Swan" environment label

QH-AA-01-001-EN-C

Appointments

Capital Markets Department In December 2000, Barbara Bargagli-Petrucci took over from Jean-Claude Bresson, who reti­red, as Director of the Capital Markets Department wi th in the Finance Directorate.

Barbara Bargagli-Petrucci joined the EIB in 1994 as Head of Division of Capital Markets and was in

Information Technology Department

1999 appointed Deputy Director of the Capital Markets Depart­ment.

Her career encompasses four years at Deutsche Bank, in the Corporate Finance Department, and ten years at Credit Suisse First Boston, as Head of the Capital Markets and Syndicate Depart­ment in Frankfurt.

In mid-March 2001, Luciano Di Mat t ia jo ined the EIB as Direc­tor of the Informat ion Techno­logy Department.

Luciano Di Mat t ia has had a long career w i th Q8 Kuwait Pe­t ro leum in Italy and Q8 Kuwait Petroleum Internat ional in Co­penhagen and London.

Starting as a project manager of a Corporate European General Account ing project, he was being appoin ted System Plan­ning, Control and Development Manager fo l lowing the merger between Q8 and Mobi l , then Group Information Systems Ma­nager in contro l of the corpo­rate IT strategy, and most re­cently corporate Market ing Operation Support System Pro­ject Manager co-ordinat ing in­ternat ional teams in several Eu­ropean countries.

Sir Denys Lasdun, architect of EIB head office, dies

Sir Denys Lasdun, the architect of the EIB head office building in Luxembourg, died in January 2001 at the age of 86.

Sir Denys is one of the great names in the history of the archi­tectural modern movement in Eng­land.

Of the many important buildings he designed during his life, the European Investment Bank is one of three (the others being the Royal College of Physicians and the National Theatre, London) he considered as encapsulating most successfully his approach to archi­tecture. He particularly liked the Bank's building because of its de-

Barbara Bargagli-Petrucci

Luciano Di Mattia

mocratk monu mentality - as he himself described it.

The Bank's me inaugurated In tension in 1995.

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in building was 1980 and its ex-

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Sir Denys Lasdun